What happens when Airbnb or Vrbo collect lodging taxes for short-term rental hosts?

Lodging tax compliance for short-term rentals (STRs) has become a high-profile topic in recent years. Governments at the state and local level have realized how valuable vacation rentals can be in terms of tax revenue. Many have levied new taxes for STRs or strengthened enforcement of existing tax rules.

STR operators don’t pay lodging taxes out of their own pocket — guests do. But hosts are generally responsible for collecting these taxes at the time of payment, registering with local tax authorities, and filing lodging tax returns.

While lodging tax compliance is simply a part of running a short-term rental business, it represents an administrative burden — and hosts appreciate anything that can make it easier.

For several years, STR marketplaces such as Airbnb and Vrbo have attempted to take some of this burden from hosts by collecting lodging taxes from guests when they pay for their stays and sending the taxes on to authorities. Often, marketplaces have formal agreements with tax authorities in specific jurisdictions to collect taxes for their listings.

Over the years, marketplaces have greatly expanded the number of agreements across the U.S., so the number of jurisdictions in which they collect taxes has increased. In addition, a growing number of governments now require marketplaces to collect lodging taxes for all their listings. The result is that more STR hosts now have marketplaces collecting and paying lodging taxes on their behalf.

However, even if your marketplace is collecting lodging taxes for you, you may still have compliance obligations you need to take care of yourself. In many places, the host is still responsible for lodging tax collection, even if a marketplace helps, and that requires hosts to be proactive. Short-term rental tax regulations are highly local in nature, so jurisdictions can have vastly different rules. It’s up to you to know which jurisdictions and rules apply to your property.

Here are a few questions you should ask when your marketplace is collecting lodging taxes for you.

It’s rare that STR hosts are responsible for collecting only one tax. More often, the total tax amount you collect from guests is made up of a variety of taxes — including sales and lodging taxes — from different jurisdictions

For example, in Austin, Texas, short-term rental hosts are required to collect a total lodging tax of 17% from guests and pass it on to tax authorities. This includes a 6% state hotel occupancy tax and an 11% city hotel occupancy tax.

Your marketplace may have collection agreements with some jurisdictions and not with others, so it may collect only some of the taxes you’re responsible for.

In Austin, for example, Airbnb and Vrbo collect the state portion of the tax for bookings on their platforms, but Austin STR hosts must collect and remit the city portion of the tax themselves.

Many hosts list properties on more than one marketplace, and they may book directly with guests as well. You shouldn’t assume all the marketplaces you work with are collecting lodging taxes for you.

For example, in Palm Desert, California, short-term rental hosts are required to collect transient occupancy tax (TOT) from guests and file monthly occupancy tax returns. Airbnb collects TOT for STR operators in Palm Desert, but Vrbo doesn’t. If you list your property on both Airbnb and Vrbo in Palm Desert, you’ll need to do your own tax collection for any bookings through Vrbo. And if you’re booking directly, you’re solely responsible for lodging tax compliance.

It’s important to know that in many cases, vacation rental marketplaces do not register for you or report your earnings or the amount of lodging tax paid on your behalf to tax authorities.

In a growing number of jurisdictions, such as Indiana, marketplaces are required by the government to collect taxes for you when the listing is booked. You’re only responsible for reporting lodging taxes if they’re not being collected for you.

But in many jurisdictions, you must register with tax authorities and file lodging tax returns to report your short-term rental earnings and taxes collected — even if Airbnb, Vrbo, or another marketplace is collecting for you.

Since one size doesn’t fit all when it comes to STR regulations, the only way to know if you’re complying with local lodging tax rules is to get to know the rules yourself — which is sometimes easier said than done.

Or you can seek help from Avalara MyLodgeTax, which simplifies and automates lodging tax compliance. MyLodgeTax makes sure you’re registered with the right jurisdictions and filing all required returns on time — whether your short-term rental marketplace is collecting for you or not. We’re here to help. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.